Kevin Lum, CFP, warns a Social Security fix could mean “raising the full retirement age”
There have been a lot of scary headlines about the Social Security Trust Fund running out of money but there are fixes available that are attainable.
Americans who count on Social Security retirement benefits as a major source of income and those who expect they will be, may have heard some concerning news. That the trust fund that supports those payments could be depleted withing the next six years.
These were the findings of a recent analysis by the Penn Wharton Budget Model, predicting that the Social Security trust fund could run out of money in 2032. That’s a year earlier than the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds forecast in their 2025 annual report.
Were the trust fund to go insolvent, continuing program income would only cover an estimated 77% of total benefits. There have been warnings about this situation for several years now, and Congress is well aware that it must act in order to prevent that from happening. Proposals have been made but none has garnered enough support to move forward, yet.
The various ways Congress can fix Social Security retirement benefits
Basically, lawmakers on Capital Hill have only a few ways to ensure the solvency of the retirement program, either cuts need to be made, revenues must be increased, or a combination of both. Kevin Lum, a certified financial planner, explained the four levers that Congress has at their disposal in a video on YouTube and that they will most like use a combination of them.
They include the following:
- Raising or eliminating the payroll tax cap
- Adjusting how the cost-of-living-adjustment (COLA) increase is calculated
- Small benefit formula adjustments
- Raising full retirement age
Lum felt that the most likely outcome will be a version of the 1983 bipartisan compromise on Social Security reform that saw among other things the full retirement age gradual increase from 65 to 67 for those born in 1960 and later.
There has been talk of raising the full retirement age to 68 or 69. This, however, would only affect those in their 40s and younger and be carried out over several years. Typically, he says, those within ten years of retirement are grandfathered in, so they shouldn’t worry about this potential change.
With 15 years of experience on Capital Hill, he has confidence that Congress will get a fix across the line, “that lands somewhere between 2029 and 2032,” but before the deadline expires.
“We’re going to see a lot of scary headlines over the next couple of years,” he notes. “But at the end of the day, Congress is going to find a way to fix this. Because if there is one thing both parties agree on is that they don’t want to be the one holding the bag when seniors receive a 23 or 28% cut in their pay.”
Even if Congress misses the deadline, he predicts only a temporary reduction in scheduled Social Security payments, with lawmakers on Capital Hill making retroactive fixes to make seniors whole at the end of the day.
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